Outrageous?

President Barack Obama believes the multi-billion dollar bonuses that Wall Street banks awarded themselves for 2008 are "outrageous." Read here.

I have two questions. First is that how dare they are. Second is how could the government let this happan again. If you read WSJ everyday, you could exactly know they are doing it. On the one hand, we have greedy private sectors; on the other hand, we have a sleepy government. And the financial crisis in September didn't change this nature.

Updated: Another angry man about Wall Street.
My third question: Do you trust Wall Street now?

Who Gets What from Stimulus Package

Here.

Update: Here is some information about states budget shortfall.

A War on Fiscal Stimulus

There is a war on fiscal stimulus plan in academy. Here is the log.

• 11/25 Taylor
• 11/25 Krugman
• 1/4 Krugman
• 1/10 Mankiw
• 1/11 Becker
• 1/13 Fama
• 1/19 Krugman
• 1/19 Krugman
• 1/19 Mankiw
• 1/22 Barro
• 1/25 Krugman
• 1/26 Cochrane
• 1/26 Delong
• 1/27 Feldstein
• 1/27 Sachs
• 1/27 Shiller
• 1/27 Krugman
• 1/27 Mankiw
• 1/27 Thoma
• 1/27 Delong
• 1/28 Krugman
• 1/28 Krugman
• 1/28 Fama

Keynes

The New Republican had an interesting article about John Maynard Keynes.

An Interview with Robert Engle

Robert Engle talks about the financial crisis. He argues that the coordinated stimulus policies all over the world are needed!


But the faculty at University of Chicago don't agree.

Shopping Vouchers

Taiwan government distributes $100 shopping voucher to each resident in Taiwan to stimulate the economy. It will be interesting to see the multiplier effect of this fiscal policy.

A Letter to New Treasury Secretary

Luigi Zingales wrote a letter to new Treasury Secretary Geithner.

The Future of Banking Industry

It will go back to a normal (boring) industry said NYT.

The Future of Hedge Funds

Unhinged eedge funds from NYT.

Krugman Wrote A Letter to New President

Paul Krugman wrote a Letter to new President: What Obama Must Do.
He suggested several things, three of which are as follows
1. Rescue the economy (I agree)
2. Universal health care (I agree)
3. Increase union power (I am skeptical)

Fiscal Stimulus Plan

American Recovery and Reinvestment Plan.
One part is about higher education:
Education for the 21st Century: To enable more children to learn in 21st century classrooms, labs, and libraries to help our kids compete with any worker in the world, this package provides:
• $41 billion to local school districts through Title I ($13 billion), IDEA ($13 billion), a new School Modernization and Repair Program ($14 billion), and the Education Technology program ($1 billion).
• $79 billion in state fiscal relief to prevent cutbacks to key services, including $39 billion to local school districts and public colleges and universities distributed through existing state and federal formulas, $15 billion to states as bonus grants as a reward for meeting key performance measures, and $25 billion to states for other high priority needs such as public safety and other critical services, which may include education.
• $15.6 billion to increase the Pell grant by $500.
• $6 billion for higher education modernization.

Arnold Kling's Lectures on Macroeconomics

Arnold Kling had his Lectures on Macroeconomics available.

Suggestions for WSU Budget

Our school asks for suggestions for our 2010-2011 budget under the current recession and the staggering buget shortfall of Minnesota State. Here is the email I wrote:

Dear Sir or Madam,

I have three suggestions:
1. Based on the Obama's "the Job Impact of American Recovery and Reinvestment Plan" released on January 10, 2009, one of the key components of $775 billion will be spent on state fiscal relief designed to alleviate cuts in healthcare, education, and prevent increases in state and local taxes (p.4). I predict that this stimulus package will be passed by Congress soon (no later than February 2009). Therefore, I suggest that WSU, MnSCU, and Minnesota government (congressmen) should work together to make sure that our state will get the appropriate proportion of this federal handout sooner than later. Our WSU 2010-11 budget should be planned based on this practical assumption.
2. In addition to our projected budget shortfall, the stimulus money will be desperately looking for shovel-ready investment projects which will enhance country’s long-term productivity (such as infrastructure, school repair etc) because of its timely mission fighting recession. So now WSU could prepare and get these kinds of projects ready and then we can do it right away when the possible stimulus funding is handed.
3. I expect that WSU's enrollment will probably increase in 2010-11 for two reasons. First, under the current recession, opportunity cost of being a student is lower (wage is lower, unemployment is higher), so enrollment will go up. Second, some private-college students will come (transfer) to WSU for a relatively lower tuition cost. WSU should plan the budget based on this assumption.
Basically I think that the current budget crisis and recession bring WSU more resources if we could understand the big picture of the stimulus package and use it well.

Thanks
Wei-Choun Yu, Assistant Professor
Economics and Finance Department, College of Business

The Funniest Prediction

A Russian Professor predicted that the US will split into 6 countries in 2010. That is the most ridiculous prediction I have ever seen.

John Taylor on Financial Crisis

A friend of mine forwarded this insightful paper from John Taylor. One of the conclusion that the paper suggests is that the loosen monetary policies in the US and Europe are the main cause of the financial crisis. The evidence looks persuasive.
Other related works could be found in the working group of Hoover institution.

American Recovery and Reinvestment Plan

Today, Obama team announced the American Recovery and Reinvestment Plan (Finally!). The plan will focus on:

• Investments in infrastructure, education, health, and energy
• Increases in food stamps and expansions of unemployment insurance
• State fiscal relief to alleviate cuts in health care, education, and prevent increases in state and local taxes (I hope state governors read it!)
• Business investment incentives
• A middle class tax cut

The plan also shows the detailed breakdown of the stimulus impact on employment increases. It is a little bit weird that it didn't show the breakdown of money spending. It seems missing something. Anyway, it looks OK.

Update Interview with Romer (CEA chairman) about the stimulus plan as well as Obama's talk about the plan.

Brad Setser on Global Imbalance and Financial Crisis

If one asks me to narrow the causes of global financial crisis down to two major reasons, I will say that the first cause is naive financial regulation and the second cause is the global savings glut. Setser had a fabulous analysis on this issue.

On Stimulus

Again, Hal Varian and Ed Glaeser have the same opinion as mine on the role of stimulus for states spending. It is odd to me that Obama team have not yet mentioned any specific proposals on state budget crisis while we are hearing that California, New York, Washington, Minnesota, etc. are announcing spending cut or raising tax every day.

The Chart for Four Bears

Based on the history, the current bear market doesn't look good.
From dshort.